Geospace Technologies Corporation's (NASDAQ:GEOS) 26% Cheaper Price Remains In Tune With Revenues

Geospace Technologies Corporation (NASDAQ:GEOS) shareholders won't be pleased to see that the share price has had a very rough month, dropping 26% and undoing the prior period's positive performance. Looking back over the past twelve months the stock has been a solid performer regardless, with a gain of 23%.

In spite of the heavy fall in price, there still wouldn't be many who think Geospace Technologies' price-to-sales (or "P/S") ratio of 1x is worth a mention when it essentially matches the median P/S in the United States' Energy Services industry. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for Geospace Technologies

How Has Geospace Technologies Performed Recently?

Geospace Technologies has been doing a good job lately as it's been growing revenue at a solid pace. Perhaps the market is expecting future revenue performance to only keep up with the broader industry, which has keeping the P/S in line with expectations. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Geospace Technologies will help you shine a light on its historical performance.

Is There Some Revenue Growth Forecasted For Geospace Technologies?

In order to justify its P/S ratio, Geospace Technologies would need to produce growth that's similar to the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 25%. Pleasingly, revenue has also lifted 41% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Weighing that recent medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 11% shows it's about the same on an annualised basis.

With this information, we can see why Geospace Technologies is trading at a fairly similar P/S to the industry. Apparently shareholders are comfortable to simply hold on assuming the company will continue keeping a low profile.

What Does Geospace Technologies' P/S Mean For Investors?

Following Geospace Technologies' share price tumble, its P/S is just clinging on to the industry median P/S. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

It appears to us that Geospace Technologies maintains its moderate P/S off the back of its recent three-year growth being in line with the wider industry forecast. Currently, with a past revenue trend that aligns closely wit the industry outlook, shareholders are confident the company's future revenue outlook won't contain any major surprises. Given the current circumstances, it seems improbable that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.

Having said that, be aware Geospace Technologies is showing 1 warning sign in our investment analysis, you should know about.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.